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Brookfield Asset Management of Canada has made its first significant investment in Indian infrastructure, buying six road and three power projects from Gammon Infrastructure Projects Limited.
The total project cost at completion of the asset basket is estimated to be around Rs 6,750 crore (Rs 2,935 crore of 6 operational projects and Rs 3,815 crore for remaining 3 projects) of which Rs 3,097 crore has been capitalised till March 31, 2015. The outstanding debt as at March 31, 2015 for these projects is Rs 1,718 crore and the net exposure of GIPL in the asset basket is Rs 415 crore.
A consortium composed of Brookfield and the Core Infrastructure India Fund Pte Ltd (CIIF) are buying the projects, six of which are operational, said Ambit Holdings, which advised Gammon on the deal.
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After the transaction, the consolidated debt of GIPL will stand reduced from Rs 3,947 crore to Rs 2,229 crore which is expected to improve the gearing of company at consolidated level from more than four times to around two times going forward and make GIPL net cash surplus. The recent policy changes in the infrastructure space, especially by the Ministry of Road Transport and Highway, is likely to have resulted in the revival of interest of marquee overseas investors such as Brookfield.
The company is a global alternative asset manager with over $200 billion in assets under management, focusing on infrastructure, renewable energy, private equity and property. CIIF is an India-focused infrastructure fund managed by the Singapore branch of Kotak Mahindra (UK) Ltd.
Abhijit Rajan, chairman and MD of the Gammon Group, said, “The transaction involving 9 projects represent the largest asset sale at one go in the Indian infrastructure industry. This is reflective of the improved sentiments being demonstrated by foreign investors due to positive approach of the government in the infrastructure space.”
The consideration towards equity comprises of cash of Rs 192 crore and a waiver of advances to GIPL of Rs 285 crore.
The project SPVs being taken over will repay the inter corporate deposits of Rs 371 crore given by GIPL to the project SPVs. The aggregate cash inflows for GIPL on account of divestment would be Rs 563 crore subject to closing adjustments, said a statement. Additional cash inflow of up to Rs 100 crore may be realised by GIPL upon crystallisation of certain milestones in future, it said.
GIPL will also benefit further from a reduction in the outstanding liabilities to the tune of Rs 87 crore and 75 per cent of past contingent receivable may also be received by the company when realised.
“This transaction represents Brookfield’s first major investment in Indian infrastructure, and provides us a great platform to participate in the Indian growth story over the long term,” said Anuj Ranjan, managing partner, Brookfield.
Kishor Kumar Mohanty, MD, said, “this transaction allows GIPL to get the much needed capital released from its completed projects and improve its financial position to capture the new opportunities in the infrastructure space arising out of governments new initiatives. This is a win-win proposition for both Gammon Infrastructure and Brookfield and new path breaking direction for the infrastructure industry.”
